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The Sonic privatization mystery: What were the Tories thinking?

Gary Mar

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Viewed with 20/20 hindsight, a Frequently-Asked-Questions document published by Alberta Health Services in April 2015 offers insight into the thinking behind the former Progressive Conservative government's decision to outsource and privatize medical laboratory services in the Edmonton region and northern Alberta.

Now that Premier Rachel Notley's NDP government appears to have spiked the entire scheme in favour of evidence-based planning, to screams of outrage from the doctrinaire market-fundamentalist Wildrose Opposition, we can give our heads a shake and ask, "What were they thinking?"

Edmonton Clinical Laboratory Project FAQs contains more than a hint. Published on April 15, less than three weeks before the election that saw the NDP come to power, the public relations handout must be viewed as part of a continuum of ideologically driven efforts to encourage and justify privatization of health services. This took place under a series of health ministers going back at least as far as Gary Mar at the turn of the century.

It was always done in the face of public unease or outright hostility -- as Mar had discovered when he was the frontrunner to replace premier Ed Stelmach and let it slip he was open to more health care privatization. As a result, he got The Globe and Mail's endorsement, and Alison Redford got the job!

Not long before, it was under Mar's successor in the health portfolio, Iris Evans, that Premier Ralph Klein birthed his "Third Way" privatization scheme. The Third Way was a not-so-subtle effort to slip private services into the system that were nevertheless compliant with the strict letter of the Canada Heath Act.

The PC government's disastrous experiment with private surgical clinics like the Health Resource Centre in Calgary, which went bankrupt in 2010 leaving AHS holding the bag, the queue-jumping scandals that led to the politically damaging 2013 preferential health services inquiry, and its costly and disruptive effort to end the public role in seniors’ care by subsidizing private "extended care" facilities all stemmed from the same ideology.

Whether the premier was Klein, Stelmach, Redford, Dave Hancock or Jim Prentice, and whether the health minister was Mar, Evans, Hancock, Ron Liepert, Gene Zwozdesky, Fred Horne or Stephen Mandel, the assumptions and prejudices that drove the scheme to privatize an essential $3-billion-plus medical testing laboratory used by most of northern Alberta were entirely in tune the neoliberal philosophy that has dominated the PC Party since Klein, and which also dominates its Wildrose twin.

And if Albertans didn't like it? Well, who cared? They always voted Tory anyway… an interpretation of the inevitability of history of which Alberta Tories were disabused on May 5 this year -- and which nowadays with good reason is causing a certain amount of angst in federal Tory ranks.

Some ministers tried to push privatization by brute force, some with diplomacy and tact, some with deception and guile, but the objective was always the same: privatization, privatization and privatization. This despite the fact an honest assessment of the medical lab plan always suggested a public solution to this essential public service made more sense.

So the April 2015 Frequently Asked Questions -- skillfully composed by AHS public relations specialists -- began with the false assumption that the service just had to be built and operated by the private sector.

Indeed, the privatization question wasn't openly addressed until the middle of the four-page list of questions and answers, which was clearly designed to sooth public unease about the project. But it stood behind the opening assurances of the competence of Sonic Healthcare Ltd. to do the job, not to mention that of the other two bidders, and the whole rickety ideological structure on which the idea rested.

The composer of the FAQ poses the question then being asked by many Albertans as follows: "Why are you privatizing lab services? Aren't you worried about the additional costs of a for-profit company running lab services?"

The response by the same author starts by accurately pointing out that Dynalife DX, the company already doing some of the work the Tory government wanted to hand to Sonic, was also in the private sector. But the document then moved quickly into the realm of spin, falsely claiming AHS simply did not have the capacity to manage the job without private-sector help.

We are building on this model to further promote quality and efficiencies in our system, resulting in less cost spent on laboratory services in the future," the anonymous FAQ author said soothingly, and without specifics or evidence. "By partnering with a global laboratory service provider like Sonic, we gain access to experience, proprietary systems like automation and information technology, plus global pricing that we would not benefit from otherwise. [Emphasis added.]

As if there was no expertise and skill among AHS's 100,000 employees. As if automation and proprietary info systems are not for sale. As if a global company wouldn’t charge whatever the Alberta market would bear!

It would be interesting to learn what pricing promises Sonic made to AHS, when we know the multinational Australian corporation stood to benefit from charging as much as it could and encouraging more tests to be carried out.

"We are designing a financial model that will allow for a fair and reasonable return on investments made in Alberta, protect from excessive gains, and promote investments back in AHS as efficiencies are introduced," the FAQ stated. "The model will be very transparent and will allow AHS access to the actual costs and returns Sonic generates over the term of the commitment," it promised.

The next question was: "Do lab services in Edmonton even need to change? Can’t AHS do it?"

The answer, according to AHS: "Alberta urgently needs additional expertise and capacity to match the growing demand for critical lab services; AHS cannot do it alone. By leveraging the expertise and innovation of a proven provider of high quality lab services, AHS can offer the types of tests that doctors need access to, quickly." [Emphasis added.]

Mostly true, but for the outrageous claim "AHS cannot do it alone." Did they actually believe this? It's quite possible, given the dominance of market fundament dogma in the Alberta government at the time. Or did they know it was baloney, as the claim's placement in the document suggests? It hardly matters. The point is, it was simply not true.

Running a large medical testing facility is a classic example of a job that is done best by the public sector -- without the need to pay executive bonuses, drum up unneeded but profitable tests, finance massive corporate debt at commercial interest rates or pay comparatively high Australian business taxes.

After that, the document returned to familiar ground -- mostly accurate analysis of the current and future challenges facing the medical testing arm of the provincial health care system, as well as the labour relations challenges of making a large number of skilled employees switch employers, forcing many public employees into the private sector. One imagines this wouldn’t have worked quite as smoothly as promised.

Regardless, the document was nothing more than an advertisement for a privatization scheme that rightly aroused concerns among a skeptical public.

Near the end, the FAQ asks, "How will AHS ensure that quality will be maintained?"

This answer too is interesting. "AHS will continue to oversee all lab services in Alberta. The governance structure will ensure high quality and safe laboratory services are provided at efficient prices, no major changes will be made without consultation and approval, and a consistent approach will be maintained across the province. Required accreditations will be met and maintained by the private provider."

Remember, the governance structure, then and still, was a single "Administrator," appointed by the health minister and, at the time, a like-minded former colleague of the minister.

The faith exhibited by the government, the health minister and AHS in this idea was charming -- or insane. Thank goodness -- as well as the Notley Government and its health minister, Sarah Hoffman -- we're now on a more sensible path!

This post also appears on David Climenhaga's blog, AlbertaPolitics.ca.

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